25 Mar 2018

CJEU on VAT agricultural flat rate scheme

14 March 2018

Don’t fence me in


  • The benefits of the agricultural flat rate scheme.
  • Its use as an alternative to normal VAT registration.
  • HMRC guidance placed a monetary limit on the benefit accruing from the scheme.
  • The European VAT Directive does allow the exclusion from the scheme of some categories of farmers.
  • The Court of Justice of the European Union confirmed the scheme can be used even if there is a substantial benefit.
  • The validity of the scheme must be considered on a macroeconomic scale by reference to all flat rate farmers.

With the complexities of Brexit being considered in depth by the farming community it is ironic that, in Shields & Sons Partnership v HMRC [2017] C262-16, the Court of Justice of the European Union (CJEU) confirmed the VAT position of a farm. The court decided that HMRC cannot exclude a farming business from the agricultural flat rate scheme (AFRS) simply because this resulted in the payment of less VAT than would otherwise arise. The scheme had resulted in the business being substantially better off than if it had simply registered for VAT and used normal VAT accounting rules.


Setting the scene

For those unfamiliar with the scheme, it is an alternative to regular VAT recording and calculating for farmers. It is designed to compensate farmers for the VAT they suffer on purchases by simplifying and streamlining the VAT cashflow.

Farmers can use the AFRS as long as their income from non-farming sources does not exceed the ...

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